global insurance management

Social Media


Aug 27 2014

Social Media

Relevance:                   All firms that use Social Media to promote their business.

Action required:           Be aware of FCA requirements.

With the increasing use of digital/social media for all sorts of things, it is timely that the FCA has decided to publish details of its requirements for firms that wish to use this form of media to promote their business.

The Oxford Dictionaries 2013 defines Social Media as “websites and applications that enable users to create and share content or participate in social networking”, which would include;

  • Blogs; Microblogs (Twitter); Social Networks (Facebook, LinkedIn, Google+); Forums and Image and Video-Sharing Platforms (YouTube, Instagram, Vine, Pinterest).

The FCA has recently issued a Guidance Consultation on “Social media and customer communications” where they explain their supervisory approach to financial promotions in social media

The FCA states that:

The Guidance Consultation is intended to:

  • clarify and confirm our approach to the supervision of financial promotions (as defined in the legislation) in social media;
  • help firms understand how they can use these media and comply with our rules;
  • remind firms that our rules are intended to be media-neutral to ensure that consumers are presented with certain minimum information, in a fair and balanced way, at the outset of firms’ interaction with them;
  • set out specific areas that firms need to consider, and provide some solutions and illustrative examples.

Firms should recognise that a communication that includes an invitation or inducement to engage in financial activity, be it insurance, mortgages, banking or consumer credit, as well as investments in the narrower sense, is likely to be a Financial Promotion and therefore, subject to the rules governing them.

Principle 7 (Communications with clients) of the FCA’s Principles for Businesses states that A firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading”.

Initial reactions seem to indicate that the proposals do not really clarify the position and could lead to some confusion.  That said, at least the regulator appears to be tackling an area that is becoming more and more popular in its usage; indeed they have said that they “recognise that social media are particularly powerful channels of communication and therefore of significant value to firms. We do not want to prevent their use. These media allow firms to contact their customers, and vice versa, both pre- and post-sale.”

There are some useful suggestions made:

  • It is important that, in all cases and for social media in particular, it is clear that a promotion is a promotion. One generally accepted way to do this, for character-limited media, is the use of #ad.
  • Communications through social media can reach a wide audience very rapidly, so firms should take account of that in their decision to promote through social media, and the nature of their promotions.
  • Firms should ensure that their original communication would remain clear, fair and not misleading, even if it ends up in front of a non-intended recipient (through others re-tweeting on Twitter or sharing on Facebook).
  • Firms should consider the appropriateness of character-limited media as a means of promoting complex features of financial products or services.
  • It may be possible to signpost a product or service with a link to more comprehensive information, provided that the promotion remains compliant in itself.
  • Each communication (e.g. a tweet, a Facebook insertion or page, or web page) needs to be considered individually and comply with the relevant rules.6

Those who wish to read the document itself can use the following link:

http://www.fca.org.uk/news/guidance-consultations/gc14-06-social-media-and-customer-communications

The consultation closes on 06 November 2014.

So, all financial promotions must be authorised by a senior member of the firm’s management and recorded in the appropriate register.  The use of Social Media should be carefully considered and controlled to prevent the communication being outside the relevant rules.

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